There are hundreds of definitions of corporate social responsibility, or CSR. The one we think says it the best comes from the International Organization for Standardization’s Guidance Standard on Social Responsibility, ISO 26000, published in 2010. It says:
“Social responsibility is the responsibility of an organisation for the impacts of its decisions and activities on society and the environment, through transparent and ethical behaviour that:
- Contributes to sustainable development, including the health and the welfare of society
- Takes into account the expectations of stakeholders
- Is in compliance with applicable law and consistent with international norms of behaviour, and
- Is integrated throughout the organization and practised in its relationships.”
Corporate Social Responsibility or CSR has been debated since the early twentieth century, but there has been little agreement over its definition due to:
- Differences in national and cultural approaches to business
- Differences in motivation for CSR – doing it because it is morally correct or doing it because it makes good business sense
- Differences in disciplinary backgrounds, perspectives and methods of scholars engaged with CSR
Business View of CSR
Business leaders and management scholars have generally understood CSR as a response to business failures that have accompanied the astonishing growth in size, impact and power of modern corporations. That growth is characterised by the separation of ownership from control and the rise of modern management techniques. While modern management has created great efficiencies, it has also led to a dilution of individual responsibility that is generally only visible when business gets into strife.
Business failures in Australia, such as Australia’s then biggest corporate collapse of HIH in 2001, together with crises in corporate accountability, such as the machinations of James Hardie to avoid liability for asbestos compensation by former workers, have led to a greater questioning here of the nature of corporate responsibilities.
Business leaders deal with CSR issues through specialist business organisations such as the Global Reporting Initiative, the UN Global Compact and the World Business Council for Sustainable Development. In contrast, scholarship related to CSR draws from many areas, including management, ethics, psychology, sociology, finance and accounting, sustainability, public affairs and communications.
Overlaying the general trend to view CSR as a response to business failures, business views of CSR have additionally been shaped by national and cultural contexts.
In the United States, the concept of CSR as it is practiced today began to develop in the 1970s in response to large scale societal changes such as the rise of the civil rights movement, the rise of consumerism (protection of consumers from exploitation) and growing anti-war sentiment (Vietnam). This values shift has been identified by the World Values Survey as part of a broad-based values shift that began after World War II among westernised societies (Inglehart, 2000). As these societies successfully overcame material challenges in the aftermath of war, such as provision of jobs and housing, they moved gradually to embrace post-materialist values, in which personal expression, individual freedom and satisfaction of higher-order societal needs prevail. CSR in the USA arose as a business expression of this values shift, embraced initially by a handful of influential and vocal entrepreneurs with an almost religious zeal. Businesses such as Ben and Jerry’s (now owned by Unilever) and Stonyfield Farm (now owned by Danone) had a disproportionate influence on business policy debate. By “selling out” to multinational corporations, they have attempted (possibly successfully) to mainstream CSR into business practice.
In the United Kingdom, the zeal of early “CSR-niks” was tempered by the view that CSR would be useful to business if it could deliver business benefits. A strategic view of CSR is thus more prevalent among UK-based firms. The UK-based organisation Business in the Community (BITC) was established in 1982 in response to perceived failures of business against a backdrop of rising unemployment and urban rioting and attempts to integrate considerations of societal impacts into business strategy.
In Europe, environmental considerations prevailed and the concept of sustainability may be expressed more than the concept of CSR. For example, environmental disclosures in company reporting are more prevalent than references to ethics.
In Japan, CSR has traditionally been expressed primarily through benefits to employees and environmental reporting. In India, leading CSR companies such as Tata Steel view extensive social investment as a core part of business strategy.
In Australia, we see evidence of all of these approaches to CSR, although the strategic view as practiced in the UK, combined with attention to the concept of sustainability, is most prevalent among CSR leaders. A strong stakeholder orientation is evident in successive reports of the Annual Review of the State of CSR in Australia.
Governance View of CSR
CSR can also be viewed as a global governance mechanism. Understanding CSR from this perspective is useful for realising why civil society and government are interested in CSR. The view of CSR as a global governance mechanism emerges from the global trans-national institutions that developed in the twentieth century, such as the United Nations, the International Labour Organisation, The World Bank and the Organisation for Economic Cooperation and Development (OECD), together with international treaties and agreements negotiated by governments and non-government organisations. These institutions and arrangements are designed to create international order around the pillars of democracy, respect for human rights, and economic development.
In particular, the world’s failures to redress poverty and abuses of human rights and the need to assure equitable benefits from trade liberalisation have driven the rise of the CSR concept among these organisations. This explains the plethora of initiatives at this level such as the UN’s Bruntdland Commission which popularised the notion of sustainable development and the proliferation of over 300 different codes and guidelines related to corporate social responsibility.
The Sustainable Development Goals released by the United Nations in September 2015 are the latest international framework to address CSR issues.
These initiatives are designed to regulate or self-regulate corporations. They can also provide a platform for corporations to contribute to increasing the efficiency and effectiveness of the global governance environment, because corporations as uniquely equipped to contribute to social capacity-building However, unlike the values-driven version of CSR that emerged in the USA, and unlike the strategic view of CSR that emerged in the UK, the global governance view regards CSR as an economic necessity that creates public value at the same time. A long-term perspective on creating economic and social value underpins this approach. Achieving CSR goals within this vision requires strong and effective collaboration between business, civil society and government.
To whom is the corporation responsible?
The rise of the stakeholder concept has been attributed to the management scholar Edward Freeman (1984). Although Freeman did not coin the term, “stakeholder”, he was the first to show how the stakeholder concept could be applied to the strategic management of business. The term stakeholder arises from the concept of ownership. Stakeholders of an organisation have ownership claims which may be material (financial or non-financial), informational, political, or affiliative. Material stakes can include financial stakes such as stock dividends, or salary and benefits as well as non-financial stakes such as access to clean air and water. Fear of loss often drives material stakeholders into action. Each of these types of stakes can be held by different stakeholders and each type of stake and stakeholder can potentially be a source of social risk for a firm. For example, employees may have material stakes as well as informational and affiliative stakes (the need to feel a sense of belonging).
More recently, scholars have argued by reference to the experience of well-known companies such as Shell and Motorola, that the corporation be understood as an entity with the purpose of creating wealth in all forms for its stakeholders (Post, Preston, & Sachs, 2002). “Wealth” is broadly defined as “the cumulative result of corporate performance over time, including all of the assets, competencies and revenue-generating capacities developed by the firm” (p. 36). By attending to the interests and issues of a wider set of stakeholders, corporations can maximise their intangible assets such as relationships, goodwill, reputation, trust and opportunities for innovation.
Building on a stakeholder view of the firm, management gurus Michael Porter and Mark Kramer introduced the concept of “shared value” in Harvard Business Review in 2011. It has become one of the most influential and widely read articles related to the field of CSR. Its most prominent contribution to thinking on CSR is to emphasise the need to bring scale and innovation to address social problems. In this respect it echoes ‘bottom of the pyramid ideas first described by C. K. Prahalad and Stuart L. Hart
The key stakeholders for corporations are generally considered to be shareholders, employees, local communities (often represented by civil society organisations), customers and suppliers. Other stakeholders such government, regulatory authorities and media are usually included in stakeholder management strategies pursued by corporations.
A key task for management is then, to identify these stakeholders and understand their salience for the strategic future of the business. A common way of prioritising stakeholders is by their power, urgency and legitimacy. Other approaches look at their likelihood to act in the face of perceived or actual constraints or examining the simultaneous influence of stakeholders within a network of corporate and stakeholder relationships. A stakeholder view therefore leads to the perspective that the ability of corporations to manage stakeholder relationships and the social issues that attend these relationships is fundamental to the success of their CSR approach.
What are the social responsibilities of business?
The social responsibilities of business are those responsibilities that arise in the context of corporate-stakeholder relationships. Stakeholders have expectations about the behaviour and responsibilities of business that go beyond the provision of jobs and products or services. No two companies are likely to have the exact same set of responsibilities, because each corporation has different products, services and strategies and therefore, different combinations of stakeholders and stakeholder interests and issues. Nevertheless, a plethora of international initiatives have attempted to provide guidance on the question of the social responsibilities of business, such as the UN Global Compact and the Global Reporting Initiative.
Guidance from international norms
Of the many international norms, the best known and most relevant in Australia are the OECD Guidelines for Multinational Corporations. These are recommendations by governments towards business. Australia is a signatory. The government supports implementation of the guidelines through the OECD National Contact Point, housed within the Federal Department of Treasury. These voluntary principles aim to “strengthen the basis of mutual confidence between enterprises and the societies in which they operate, … improve the foreign investment climate and … enhance the contribution to sustainable development made by multinational corporations”. Although prepared for multinational corporations, the Guidelines set out general principles for business.
The OECD Guidelines require corporations to contribute to economic, social and environmental progress, respect human rights, encourage local capacity building, uphold good corporate governance, and foster trust between business and society. Highest standards of disclosure, labour and industrial relations and consumer protection are called for, as is the avoidance of bribery and anti-competitive behaviour.
Norms for corporate social responsibility are also encapsulated in the United Nations Global Compact, a voluntary set of principles that promotes human rights, environmental preservation and labour rights.
Many industries have developed their own norms of responsible behaviour, such as Responsible Care for the chemicals industry, the Fair Labor Association’s Workplace Code of Conduct and the Marine Stewardship Council’s Principles and Criteria for Sustainable Fishing. Over 300 corporate responsibility standards are thought to be in existence.
Guidance from stakeholder norms
Different stakeholders have different CSR issues and expectations with different implications, which can be summarised as follows:
Employees are concerned with traditional human resources management issues such as personnel policies and practices, pay, benefits, recruitment, etc. However, new HR issues are driving increased social responsiveness by corporations. These issues include work-life balance, care of dependent relatives, diversity, sexuality in the workplace, religion/spirituality in the workplace, minority hiring practices, responsible redundancy, use of temporary workers and workplace culture. Corporations that effectively respond to these issues are generally considered to be “employers of choice”. The benefits of socially responsible behaviour on these issues include improved workplace morale, higher productivity, reduced employee turnover costs and greater identification with employers. This last is thought to be a particularly important benefit as high employee identification increases the likelihood that employees will act in employers’ best interests, thus reducing risks of fraud and unethical behaviour.
Supply chain CSR issues include human rights of outsourced workers, ethical sourcing, prompt payment, use of migrant workers, doing business with oppressive regimes, treatment of animals and environmental impacts in the supply chain. Supply chain issues have been at the heart of CSR crises experienced by some prominent US-based companies such as Nike and Gap, which rely on outsourced labour in third world countries. Consumer boycotts and demonstrations posed a threat to business continuity. Nike has in response increased its monitoring of human rights and labour relations practices and substantially increased disclosure of its suppliers. As Australian firms become increasingly globalised, supply chain CSR issues have become more prominent.
Many studies suggest that consumers are more likely to purchase from socially responsible firms or avoid purchases from socially irresponsible firms, and consumer preferences for products that are good for the environment (organic, or not tested on animals) are well documented. CSR issues for consumers include product manufacturing (e.g. human rights of workers, product safety), labelling and packaging (disclosure and completeness), marketing and advertising practices, selling practices (redress) and pricing. Australia’s tough regulatory environment does not necessarily protect corporations from rising CSR-related expectations of consumers.
Communities can include local communities around a business or a company site, as well as civil society organisations. Corporations often pursue community relations strategies that include corporate community investment, partnerships between employees and communities or traditional philanthropy. Objectives can include commercial advantage (brand, cause related marketing), legitimacy (relationships, political positioning) and workforce development. Benefits of attending to CSR issues in communities include improved reputation and reduced conflict with activist groups which is often conducted through the media.
CSR issues for investors can relate specifically to socially responsible investment strategies, or more broadly to understanding and identifying material sources of social risk. More recently, investors have become more active in engaging directly with companies about their social, environmental and governance risks, often through industry associations like the Australian Council of Superannuation Investors. Investors are also increasingly the object of activist campaigns on climate change or human rights issues. In some cases, investors have sold out of (divested) companies based on their assessments of climate change or human rights risks.
The State of CSR in Australia and New Zealand
If you want to find out more about CSR in Australia and New Zealand, read our Annual Reviews and other research reports in our Research Report Library. Our Annual Review State of CSR is the longest ongoing study into the CSR capabilities and performance of Australian and New Zealand organisations, providing unparalleled insight into practices and trends across the CSR landscape. Every year since 2008, the research tracks organisational CSR priorities for the year ahead, tips to accelerate CSR progress, key lessons from leading companies and undeveloped opportunity areas.